What types of financial adviser are there?

Independent financial advisers (IFAs) recommend products to you after researching the whole market. They are required by law to provide you with unbiased advice suited to your personal situation.

Multi-tied advisers advise on the products of just a few companies.

Tied advisers advise you on the products of one company. They are often employed by insurance companies to sell their products. Think about the advice you need before choosing a financial adviser. In most cases, an independent adviser is most likely to get you the best deal. They look at all the products available before making a recommendation.

How are financial advisers paid?

There are three main ways of paying for financial advice:

Fees. This could be an hourly rate or a set fee.

Commission. Your adviser receives a cut from the products they sell to you.

A combination of fees and commission.

Ask your adviser to explain how they want to be paid for their services. Tied advisers usually get paid commission. IFAs are either commission-based, fee-only, or a mixture of the two. Critics of commission-based advisers warn that they may recommend products that pay the highest commission rates, rather than those that best meet your needs. However, a good adviser shouldn't do this.

How do I find a financial adviser?

Ask around among friends, family and colleagues for recommendations. You could also visit www.unbiased.co.uk, which has a network of IFAs. Just enter your postcode and it will indicate your local IFAs.

How do I check out an adviser?

Financial advisers have to be authorised by the Financial Conduct Authority (FCA). This includes advisers working for banks and building societies, as well as advisers working for themselves. The FCA lists authorised companies and individuals. Check if your chosen adviser is on its register.

How do I get the best from my financial adviser?

How you feel about risk. Do you prefer not to risk losing the money you put in? Or are you willing to risk losing money if it may get you a better return on your investment?

Your financial goals. For example, you may be looking to protect your income, borrow to buy a house, or save for your children's future.

How do I know my adviser is doing a good job?

A good adviser should be focused on your goals, understand how much risk, if any, you're prepared to take and your situation. They should be able to create a plan tailored to your needs. Your adviser should also respond quickly and proactively to changes in your situation or the economy. Financial advice is more than just buying products. A good adviser will also work to coordinate your tax, accountancy, insurance and legal needs. He or she should also keep in contact with you periodically.

What do I need to consider before acting on my adviser's recommendations?

Listening to poor financial advice can lead to a costly mistake. That's why it's important to:

Make sure you understand what your adviser is saying. Ask for a clearer explanation if you don't.

Read around the advice and make sure it's right for you. It's your decision, not your adviser’s.

Don’t feel pressured into signing up for anything on the spot.

If you don't like the advice you receive, look for another adviser.

What if it goes wrong?

Despite tight regulation in the UK, there are still occasional instances of fraud, mis-selling and misleading advertising. If advice you've taken later turns out to be unsuitable for your circumstances, you may have grounds to make a complaint and receive compensation.

If you feel you've been misadvised, you need to write to the company that sold you the product. If you're not happy with the company's response, you can take your complaint to the Financial Ombudsman Service. For more information, visit www.financial-ombudsman.org.uk.

Last reviewed: February 2014

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